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Stark contrast: Appraisals spark bidding wars, torpedo deals

November 26, 2012 @ 9:54 am

In recent months, some low appraisals have sparked bidding wars on local properties, including a nine-bid contest for a small farm on Bainbridge Island. The bidding wars have helped push up home prices higher than recent comparable sales, agents say.

In other cases, a low appraisal can threaten to derail the deal because sellers will not agree to a lower number.

One in three real estate professionals surveyed in September say they've had problems relating to home appraisals in the last three months, with some saying contracts have even been canceled because the appraisal came in lower than the negotiated upon sales price.

Appraisers have faced criticism over their property valuations in recent years, and have been accused of using foreclosures and short sales as comparable sales without adjusting for the reason the house sold for a lower price.

However, appraisal firms say the idea that appraisers are suppressing home sales is unfounded. Appraisers say they' don't set the value; they reflect it.

"We often hear from real estate agents, homebuilders and others that appraisals are 'killing deals,' and/or holding back the economic recovery," Sara Stephens, president of the Appraisal Institute, testified to Congress earlier this year. "These accusations are unfounded and misguided. Appraisals are not meant to simply support contracts-they are obtained to help lenders assess their overall risk. Fundamentally, it does neither the borrower nor lender any good to enter into a mortgage for more than the value of the property."

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Comments (3)


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  • jstumbo wrote...
    They are holding down prices...
    November 26, 2012 5:09 pm
    If the continue to appraise based on what previous homes sell for, then prices will never go up. My house would be based off of what a house sold for 3 months ago. And a house 3 months from now would be based on the price of selling my home, so it would be the same and not go up, ever! It would go down though, because some people may sell for a lower price because of their circumstances, and then it causes my appraisal to go down. Appraisals should be based partly on what someone is willing to pay. Supply and demand. If 10 people are willing to pay more than what the appraiser says the home is worth, then he is wrong, the fact that 10 people are willing to pay more shows that the value of the house is higher than what the appraiser says.
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  • serzsa wrote...
    So, Sara, you're saying:
    November 26, 2012 5:45 pm
    "These accusations are unfounded and misguided. Appraisals are not meant to simply support contracts-they are obtained to help lenders assess their overall risk. Fundamentally, it does neither the borrower nor lender any good to enter into a mortgage for more than the value of the property."

    And where were you 5-10 years ago? No doubt borrowers and lenders were served very well back then.

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  • Concerned US Citizen wrote...
    Appraisers?
    November 28, 2012 8:02 am
    Homes are only worth so many dollars per square foot depending on options in the home. Tile is only so much per sq. ft. installed. It is all dollars and cents not what you hope you home is worth. Add in a little for the location and there is the price.
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